New regulations for a ‘Credit Information Amnesty’ became effective 1st April 2014. “Unfortunately,” says Kevin Hurwitz, Chief Executive Officer at Wonga.com SA, “the complexity of the Amnesty has caused wide-spread confusion among consumers, some of whom wrongly believe that it removes their debt entirely.

“But this is not a case of consumers receiving a ‘get out of jail free card’ for their debt. Even though adverse listings from previous debts will be removed from credit bureau records, consumers will still be liable for current debt.”It is essential that consumers understand the new regulations, as well as how they will potentially affect them. Credit bureaus in South Africa now have two months to remove any adverse classification of consumer behaviour and adverse classification of enforcement action from the records of those who have repaid their debtsThere are two parts to the credit information removal process. The first is a once-off removal of all adverse information; and the second is the ongoing removal of paid-up judgments, he explains. “From 1st April all registered credit bureaus have two months to remove all adverse credit information and information relating to paid up judgments on an ongoing basis.”The types of information that will be removed under the new Amnesty include: adverse credit information (such as negative classifications or terms used to describe consumer behaviour e.g. ‘default’, ‘slow payer’, ‘absconded’, ‘not contactable’ etc.), information relating to paid-up judgments (such as default judgments where the consumer has now settled the debt under the judgment), details relating to disputes lodged by consumers regarding listings on their credit records, as well as adverse credit information in the payment profile represented by a mark, symbol or sign. The types of information/data excluded from the Amnesty include notices, such as: sequestrations, administration orders and rehabilitations; and Debt Review Data.So what will these changes mean for consumers?“Effectively this means that negative records, which had been held by the credit bureaus, showing how a consumer previously managed or (mismanaged) their debt obligations will no longer be held on record – and won’t be visible to credit providers,” says Hurwitz.In addition, credit bureaus will also be required to remove automatically any adverse credit information as soon as a consumer has repaid the outstanding debt, on an ongoing basis. Previously once a judgment had been paid up, the consumer would have to approach the court to have the listing of the judgment removed. Now it will be removed automatically.Many consumers assume that the credit amnesty will mean that it will become easier to apply for loans and access credit, says Hurwitz. “If anything, most credit providers will be implementing stricter credit vetting processes to ensure that the consumer will be able to afford taking out the loan in the first place. To date, a number of credit providers have relied solely on the information from credit bureaus without doing proper risk assessments before credit was granted to consumers. However, the introduction of the new regulations will require lenders to introduce their own stricter credit approval controls.”He says that in terms of Wonga’s own system, prior to this Amnesty applicants with adverse listings would have been declined straight away, but now they will proceed through the company’s own automated risk engine. “We are confident that we will be able to identify those customers who are credit worthy and those that are not because we constantly update and evolve the data we consider when making a decision.”Hurwitz urges consumers not to rely on the amnesty as an excuse to continue mismanaging their debt. “Consumers need to take ownership of their debt and credit profiles. Credit bureaus provide one free credit report a year to consumers and they are encouraged to obtain these in order to be clear about their debt obligations, as well as pick up any irregularities on their credit profile.“If consumers feel that adverse credit information has not been removed from their credit profiles after they have paid their debt, it is important that they contact their respective credit bureaus to ensure that this is done,” he adds.He says that in order to improve their credit score, consumers should always pay their accounts on or before the due date. “In addition, they should also close any accounts that they no longer use or have a need for. If consumers are not able to repay any loan or credit that they have, it is important for them to speak to their credit providers to negotiate a payment plan. In these instances, it is essential that the minimum amount is paid.“There will always be a mainstream need for credit as it plays a vital part of the economy. Whilst the credit amnesty will provide relief to consumers, it is equally important that everyone is aware of what the impact of these regulations will be and what responsibility consumers will have in managing their own debt,” concludes Hurwitz.

Footnote:About Wonga.com. Wonga.com (SA) launched publicly in South African in May 2012 and is a registered Credit Provider regulated by the National Credit Regulator. Wonga.com is a 100% automated, online credit provider which offers small, short-term loans via its website www.wonga.com .